US-Iran accord to reopen the Strait of Hormuz sends oil prices tumbling, lifts the Ibex 35 to a record above 19,000 and boosts European stocks.
Monday brought euphoria to international financial markets after the announcement of a framework agreement between the Trump administration and the Islamic Republic of Iran to end the war in the Middle East. The Spanish stock exchange opened as one of the day’s main protagonists. The Ibex 35 has smashed all resistance levels to touch a new all-time high, breaking through the 19,000-point barrier, reaching 19,122 points. With this move, the benchmark index has clocked up a rise of around 10% since the start of the year.
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The agreement between the United States and Iran draws a line under the military escalation that had kept the Middle East on edge and was threatening global macroeconomic stability.
The Strait of Hormuz reopens to global trade
The economic linchpin of the bilateral deal is the immediate reopening of the Strait of Hormuz. This sea lane is one of the world’s key logistical choke points, through which passes a fifth of the oil consumed worldwide, along with huge volumes of consumer and industrial goods.
Since the outbreak of the conflict, the blockage of this shipping route had choked global supply chains and sent crude prices soaring to unsustainable levels, fuelling fears of a new inflationary crisis.
The announcement that commercial shipping will resume has triggered an immediate slump in the price of a barrel of Brent crude, which plunged by more than 4% before the market opened, after having risen sharply during the months of hostilities. However, it still trades above its level before the conflict began.
X-ray of the Ibex 35: who are leading the gains?
This easing of geopolitical tensions has revived risk appetite among investors on the Spanish benchmark, particularly benefiting banks and major companies such as Inditex:
- Tourism and airlines: Stocks such as IAG (parent company of Iberia and Vueling, which came close to a 5% rise), Meliá Hotels and Amadeus are posting vertiginous gains. Falling fuel prices and the return of geopolitical stability are boosting expectations for the summer season.
- Banking sector: The big financial institutions (BBVA up 3.14%, Banco Santander climbing 3.48% and Caixabank gaining 1.18%) are acting as the engine of the index, buoyed by broad-based optimism and the fading risk of recession.
- Industrial, consumer, telecommunications and energy companies: Lower energy and logistics costs are giving some breathing space to the margins of companies most exposed to commodities. Inditex is up 2.07%, Iberdrola 0.30% and Telefónica 0.68% at the opening of the session.
Europe joins the market rally
The upbeat mood on the Madrid stock exchange is being mirrored across the rest of the Continent’s trading floors. The Dax in Frankfurt, the CAC 40 in Paris and the Euro Stoxx 50 all opened with strong gains, welcoming the removal of a risk that had threatened to abruptly slam the brakes on global economic growth in the second half of the year.
